The state of NHS finances and the £22bn efficiency challenge

The NHS in England is facing an unprecedented financial challenge following the longest period of constrained funding that it has ever faced. It is widely acknowledged that the NHS is facing a funding gap of £30 billion by 2020/21, with £8billion promised by the Government by 2020/21 and a further £22 billion expected to come from efficiency savings. Detailed plans to achieve this have yet to be published. However, it would require a sustained rate of productivity improvement much faster than has recently been recorded for either the NHS or the wider private economy.

At the same time, the NHS is facing a financial black hole with NHS hospitals heading for an unprecedented end-of-year (2015/16) deficit of £2 billion. On the back of the first quarter's (2015/16) financial figures, financial regulator Monitor felt compelled to label this as the “worst” financial position facing providers for a generation.

As an independent think tank, we have a key role to play in providing independent scrutiny and analysis of the state of NHS finances, as well as contributing to wider debates about the long-term funding requirements of the system. This programme of activities outlines how we will do that.

1. £22billion efficiency challenge: how are local health economies responding?

We are working with three local health economies to understand how they are approaching the £22 billion challenge – we will host workshops in these local areas and follow up with a briefing early in 2016. This will outline how local areas are responding to the need for significant efficiency savings. This project is being led by our new Senior Policy Analyst Sally Gainsbury.

In our response we welcomed the Government’s commitment to increase NHS funding in England by £8 billion in 2020/21, given the settlement other departments have received. However, we warned that this level of funding will be exceeded by the upward pressure on spending driven by an ageing and growing population, the increase in chronic disease and the rising cost of treatments. We warned that over the SR period the NHS will increasingly struggle to maintain standards and meet growing demand.

We were prominent in the run up to the election in calling for the Government to commit to bringing in the £8 billion minimum of extra funding – that NHS England says is required – smoothly over the course of the Parliament. We also recommended that the Government and health service leaders develop a plan to enable NHS hospital trusts to achieve financial balance over the next two to three years, as well as to demonstrate that this will be sufficient to support the transformation of services and to deliver on pledges such as moving to a ‘seven-day’ NHS. These recommendations were published in our report: Health and social care priorities for the Government: 2015–2020.

Sign-up for our newsletter

About us

The Nuffield Trust is an independent health charity. We aim to improve the quality of health care in the UK by providing evidence-based research and policy analysis and informing and generating debate.